This document discusses incorporating patent information into the front end of corporate innovation processes to improve return on investment. It argues that patents are critical calibration steps that can reveal whether a company can own the results of innovation efforts and have freedom to operate without litigation risk. The document provides a case study of a company that used patent analysis to avoid investing over $50 million in a project for biodegradable food packaging that would likely have faced blocking patents and inability to own the innovation. It acknowledges barriers to incorporating patents but argues incentives must be aligned between legal, R&D, and business teams to better integrate patent data into innovation decision making.

1. Rethinking the Place of Patents in the Innovation Process: A New Model for Improving Innovation ROI Jackie Hutter, MS, JD Decatur, GA 404-797-8124 www.HutterGroup.com www.PatentMatchMaker.com www.ipAssetMaximizerBlog.com Twitter @ipStrategist

2. How is corporate innovation like the journey of the Pilgrims to the New World? Copyright 2010 Jackie Hutter

3. Like exploration and settlement, innovation requires calibration of “instruments” at the front end of the process Copyright 2010 Jackie Hutter

4. Patents are critical calibration steps at the front end of innovation processes Highly determinative of ROI Information “hiding in plain sight” Small modifications early can lead to big changes in destination Copyright 2010 Jackie Hutter

5. How can patent information enhance innovation processes? Copyright 2010 Jackie Hutter

6. Ownership of Innovation Output Innovation ROI typically depends on ownership of output Successful innovations will be knocked off & competitors will enter market at lower cost Patent info on front end reveals Can you own the fruits of our innovation efforts? If so, how broadly? Innovation not just invention! Info allows to make alternate plans Protect investment using other methods Copyright 2010 Jackie Hutter

7. Risk of Innovation Output Regardless of ownership, must know early if will have freedom to operate Go/no-go innovation decisions assume clear path forward not Litigation Injunction Royalty/license ROI not met if third party patents in innovation pathway Copyright 2010 Jackie Hutter

8. Streamline Innovation Output Can we jump-start efforts by using innovations disclosed by others? Don’t reinvent the wheel Start innovation process on 30 yard line Reduce cost and improve speed Use adjacent innovations Likely patents do not cover your space and fully “baked” for your use Copyright 2010 Jackie Hutter

9. Enhance Innovation Output Patent information can provide insights into Partners Strategic alliances Suppliers Can reduce cost and improve speed to market Build on expertise of others Can reduce risk through collaboration and cost sharing Copyright 2010 Jackie Hutter

10. Guardrails for incorporating Patent info in front end Cannot tell you where/what to innovate Standard innovation decision-making criteria applies IMPORTANT: Only directional info as to patentability and clearance No product exists yet! Think of as validation/facilitation tool at “fuzzy front end” Still need usual legal analysis for go-to-market approval Copyright 2010 Jackie Hutter

11. Case Study in the use of patent info on front end: Green Packaging Large paper company interested in introducing biodegradable packaging for consumer goods due to Wal-Mart “green” initiative and general increasing consumer demand Starch-based plastic Innovation would require > $50 MM investment Would change nature of company from tree-based paper to biodegradable paper company Game-changing innovation pathway Copyright 2010 Jackie Hutter

12. Case Study in the use of patent info on front end: Green packaging ROI depended on ability to own the innovation AND have freedom to operate Just owning the specific invention would not justify scale of investment Initial review identified 1000’s of patents potentially relevant to proposed product Previous recognition of good idea, but no success in getting to market Innovation pathway potentially blocked by previous inventors Copyright 2010 Jackie Hutter

13. Process for Obtaining Business Insights from Patent Data Search-based analytics Business Team Formulates Business Question: What ROI can we expect by investing in biodegradable food packaging? Patent expert reviews master dataset: Few to 1000’s of patent filings discussing biodegradable food packaging Patent expert performs multiple searches of patent database to provide master dataset for analysis Business team consolidates targeted patent ownership data with other data to make business decision Claim Type 3 Claim Type 1 Claim Type 4 Biodegradable food packaging Dataset that reveals ownership and litigation risk of results of innovation efforts Copyright 2010 Jackie Hutter

14. Case Study in the use of patent info on front end: green packaging Patent analysis revealed Unlikely that broad ownership of innovation would be possible Significantly increased probability that competitors could copy after market developed Highly probable that infringement liability would result Avoidance would require innovation pathway to be greatly narrowed and complicated Adverse patent profile resulted in decision to kill project at an early-stage Done before product even fleshed-out Huge opportunity costs avoided Copyright 2010 Jackie Hutter

15. So, why is this so hard? Should be a “no brainer” to include patent information on front end BUT even while corporate innovation processes have been transformed at many corporation, but few have modified way they view patents Copyright 2010 Jackie Hutter

16. Traditional Corporate Silos Between Patents and Business Patent experts retain control “Create risk” Gatekeeper needed to control costs “Too complicated” Business people choose not to handle Don’t teach in B-school “Too hard” for busy person to learn Existing incentives Lawyer status based on expert role R&D = invention Business not familiar with details of IP Communication barriers Lawyers, R&D = Mars Business people = Venus Copyright 2010 Jackie Hutter

17. Cannot be successful in putting patents into front end of your innovation processes unless Incentives properly aligned Legal R&D Business Patent experts “get” innovation Ambiguity vs. certainty Business people make effort to learn basics of patents Make relevant to roles & responsibilities Copyright 2010 Jackie Hutter

18. US Patent System is for Innovators(Time to Take it Back!) Copyright 2010 Jackie Hutter

19. THANK YOU! Copyright 2010 Jackie Hutter